Next Generation Supply Management Defined

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Daily Archives: November 28, 2012

According to Steve Hall of Procurement Leaders, who was busy blogging while most people were off on summer vacation, the CPO’s challenge is to re-imagine supply chains. Traditional transformation is just not enough – you have to come up with radically different designs. You have to do for supply chains what Walt Disney Imagineering does for Disney – blending imagination and engineering in a unique way to create unique experiences with their creations.

It seems that according to Steve, rapidly escalating issues such as material shortages, commodity price volatility, increasing government regulation, and financial risk in the supply base cannot be tackled by current supply chains unless they are suitably re-imagined. I’m not sure I entirely agree.

It’s not that I disagree that CPOs will need more imagination, and more engineering skills, in the future, but we must remember that:

material shortages happen all the time as a result of natural disasters, unexpected spikes in demand, etc.

commodity prices go up and down as a result of shortages, or expected shortages, or expected surpluses

government regulations are never-ending – going back decades

financial risk has always been there – it’s just at a high-point now due to global economic instability

In short, these risks are not new. They’ve been around since trade began, we’ve had, and developed, methods to deal with them since trade began, and we’ve survived. The only difference now is that all four risk categories have simultaneously hit (near) all-time highs — and the situation is only expected to get worse. Plus, whereas shortages always disappeared in the past when production ramped up, in some categories, either due to space restrictions, climate issues, or production issues, the shortages are not going to go away any time soon. In some areas, there is only so much suitable farmland; in others, the climate is no cooperating, and others still, we can’t mine the materials as fast as we need to concern them. So, in these cases, we are going to have to engineer products to use less of these materials, or alternate materials, but this is as much of an engineering challenge as a supply chain challenge (and proof that Supply Management needs to be involved earlier in product development and closely collaborate with the rest of the organization).

In short, CPOs will need to use their imaginations more often and be more creative in their solutions when backed into tough corners, but it’s not time to throw away the time-honoured supply management toolkit just yet. We’ve faced many of these problems before (even if it has been a decade or two), and many of the solutions are still relevant.